Exam 10: Income and Expenditures Equilibrium

Suppose equilibrium income in an economy decreases by $600 as a result of a change in government spending. If the multiplier is 3, what is the change in government spending?

What is the value of the spending multiplier when MPC = 0.85 and MPI = 0.3?

The figure given below represents the leakages and injections in an economy. Figure 10.6 -Refer to Figure 10.6. If 0L represents potential GDP, then the GDP gap can be closed by increasing autonomous expenditures by an amount equal to the line segment _____.

A change in the price level in an economy will be depicted by a movement along the AE curve and not by a leftward or rightward movement of the curve.

Injections to the economy include consumption, investment, and government spending.

The spending multiplier measures the change in equilibrium income that results from a change in:

The equilibrium level of income will rise when:

Scenario 10.1 Imagine an economy that does not have international trade and is initially in equilibrium. Later the government increases the level of spending by $350 million because it received a gift from abroad. In this economy, only 65 cents of every dollar is spent, and the rest is saved. -Refer to Scenario 10.1. Calculate the value of the spending multiplier for this economy.

Ceteris paribus, a decline in the general price level in the United States will make foreign-produced goods relatively more expensive to the U.S. residents and increase the aggregate demand of domestic goods.

The table given below states the value of the GDP and the different components of aggregate expenditure for two years.? -Refer to Table 10.1. What would be the new equilibrium level of real GDP in year 2 if net exports equaled zero?

The figure given below represents the leakages and injections in an economy.?Figure 10.2??In the figure:?I, I1: Investment;?G: Government spending;?EX, EX1: Exports;?T: Taxes; and?M: Imports. -Refer to Figure 10.2. When total injections equal $20, the equilibrium level of real GDP is:

The figure given below depicts macroeconomic equilibrium in a closed economy. Assume that the spending multiplier in this economy is 1.5.?Figure 10.5 -Refer to Figure 10.5. Assume that there is a recessionary gap that can be closed by a $500 increase in planned aggregate expenditures. If the economy is initially in equilibrium with a real GDP level of $900, then the target or potential level of real GDP must be:

Which of the following is associated with an increase in the average price level?

Suppose in an economy, investment = $40, saving = $50, government spending+export = $100 and taxes+imports = $110. Then for this economy, total leakages exceed total injections by:

If a country's imports are very important in determining the volume of exports from its trading partners, then:

The Keynesian aggregate expenditures model assumes that price level is constant.

Scenario 10.2?A hypothetical open economy has a marginal propensity to import (MPI) equal to 0.2 and a marginal propensity to consume equal to 0.7. Assume that the economy is initially in equilibrium. -Refer to Scenario 10.2. What is the spending multiplier of this economy?

Suppose an appreciation of the French franc causes U.S. prices of French wine imports to rise sharply. On the other hand, Californian wine becomes relatively inexpensive to French consumers. Other things equal, this will result in:

If MPS is equal to 0.15 and MPI is equal to 0.10, an initial change of $19,000 in government expenditure would result in a total change of _____ in income.

The table given below reports the value of real GDP and its components consumption (C), investment (I), exports, and imports for two consecutive years in an economy.? -Consider Table 10.3 to calculate the value of the MPC.